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Bank of Queensland Limited ABN 32 009 656 740. AFSL No 244616.
FOR THE HALF YEAR ENDED 29 FEBRUARY 2016
7 APRIL 2016
2
JON SUTTON
Managing Director & CEO
ANTHONY ROSE
Chief Financial Officer
JON SUTTON
Managing Director & CEO
3
Successful drive for growth whilst improving risk profile
Margin maintained in competitive markets
Expenses controlled, enabling reinvestment
Asset quality metrics resilient
Good progress against strategic priorities
4
Strong lending growth …
1H14 2H14 1H15 2H15 1H16
Total loan growth ($m)(1)
4
577
1,300
1,949
+$649m
...and returns to shareholders
…contributing to Net Interest Income growth…
1H14 2H14 1H15 2H15 1H16
Net Interest Income ($m)
362399
448467
Delivering cash earnings growth…
(1) 2H14 excludes the addition of the BOQ Specialist portfolio.
1,249459
+4%
1H14 2H14 1H15 2H15 1H16
Cash earnings after tax ($m)
140161 167 179
+7%
190
Dividends (cps)
1H14 2H14 1H15 2H15 1H16
3432
3836
38
+6%
5
6
• 3,200 brokers
accredited
• Virgin Money
mortgage product
launch on track
• 8 Icon branches in
total
• 10 branches closed
or consolidated in the
half
• Credit quality
discipline maintained
• BOQ Specialist
growth momentum
maintained
• Customer deposit
growth of 10%
annualised for the
half
• New lending
origination system
covering ~30% of
applications
• Establishing data
analytics capabilities
• 3 Lines of defence
monitoring &
supervision
embedded
• Consistent sales and
service training rolled
out
• Enhanced leadership
training being
delivered
• Targets and KPIs
embedded across
group
Strategic Pillar
1H16 Progress
Customer in
charge
Grow the
right way
There’s always
a better way
Loved like
no other
ANTHONY ROSE
Chief Financial Officer
8
1H16 1H16 v 2H15 1H16 v 1H15
Net interest income $467m 2% 4%
Non interest income $85m (11%) 1%
Total income $552m (1%) 4%
Operating expenses ($256m) 5% 0%
Underlying profit $296m (5%) 7%
Loan impairment expense ($36m) (5%) 0%
Profit before tax $260m (5%) 8%
Income tax expense ($81m) (2%) 11%
Cash earnings after tax $179m (6%) 7%
Cash basic earnings per share 47.8c (7%) 5%
Return on average tangible equity 14.0% (100bps) 20bps
9
• Total lending up 10% (1.2x system), driven by new channels
• Diversification of lending portfolio continues – QLD down to 48% (from 60% FY12)
(1) Includes BOQ Specialist from acquisition in 2014
35.338.4
41.0 42.9
10
• Housing growth supported by broker
expansion and BOQ Specialist
0x 0.1x
0.9x 1.0x
1.6x
11
• Focus on targeted niche segments
• Not compromising credit quality for growth
• Subdued economic conditions & lack of
business confidence 1H16 growth(2) 1H16 Balance
Healthcare 14% $2.5bn
Retirement & Aged Care 100% $250m
Hospitality & Tourism 15% $200m
Agribusiness 21% $300m
Franchising 0% $45m
Total 19% $3.3bn
Growth in target niche segments
(1)
(1) 1H14 and 2H14 growth figures exclude BOQ Specialist. (2) Growth rates have been annualised.
12
• Growth in customer deposits (10% annualised on 2H15) to support lending growth
• Transaction account growth of 9%
68% 69%
Deposits to Loans ratio
66%
38.742.5 43.5
7.9 8.0
9.343.4
66%
8.6
45.4
66%
9.1
13
( )
• NIM maintained in a challenging environment
• Funding spreads and hedging costs increasing with heightened market volatility
• Prior period benefits of reduced funding costs no longer supporting margin
2.26% 2.27%
3rd Party
costs
NIM
( )
Asset Pricing and Mix elements• 6bps benefit from repricing initiatives
• 2bps contraction from front book
pricing
• 1bp contraction from retention pricing
• 1bp contraction from higher mix of
mortgages
Funding & Hedging elements• 2bps benefit from funding mix & cost
• 2bps contraction from hedging costs
14
• Lower Non Interest Income than 2H15
with some seasonality impact
• Customer shift to lower fee products
such as Clear Path mortgage product
• Changes to interchange fee
arrangements reduced result by $3m
• St Andrew’s reduced contribution in line
with expectations with claims experience
returning to longer term levels
8287
96
84 85
15
• Cost to income ratio 45% excluding one-offs
• $15m restructure investment: $7m in 1H16
• Amortisation profile rising with investment in
digitisation in line with expectations
4% underlying
cost growth
256
213
256
105108
135
156
195
84
244
16
• Slight reduction in impairment
expense to 17bps of GLAs
• Overall portfolio quality improved
• Commercial uptick driven by
small number of uncorrelated
larger exposures
• BOQ Finance portfolio
performance back within
expected range
(1) Includes BOQ Specialist
17
259
298 293
237
111
8882
Down
7%
74
240 86
18
• Housing arrears stable, with seasonal
uptick post-holiday period
• Commercial arrears remains in acceptable
range
• BOQ Finance arrears performing well
(1) Including BOQ Specialist (2) Housing excluding Lines of Credit
Seasonal uptick
19
QLD
VIC
TAS
NT
WA
1,133
1,071
Completion 2017
Completion 2016
Apartment construction exposures
• $284m current exposure to residential
construction(1)
• 41 developments across 4 states,
completing 2016 through 2017
• Highest concentration in QLD and VIC,
well diversified intra-state
Regional Housing exposures
• No material problem signs emerging in
QLD & WA regional housing exposures
Regional Commercial & Leasing exposures
• No systemic issues emerging
• Direct mining industry exposure <$200m
NSW
SA
Limit - $281mExposure - $96m
# Apts - 810
Limit - $71mExposure - $44m
# Apts - 228
Limit - $242mExposure - $91m
# Apts - 916
Limit - $61mExposure - $53m
# Apts - 250
250
218
228
375 435
698
42%
37%
11%
10%
Concentration
(1) Projects over $5m
Lending to residential apartment construction
# Apartments
20
• Higher growth in the half supported by underlying capital generation
• Seasonality and timing impacts reduced CET1 to 8.80%
• Back-ended RWA growth without full period earnings contribution
• Remain well capitalised relative to peers
Underlying capital generation
(1) Cash earnings adjusted for one-off non-recurring items which in this half represents the impact of the restructuring costs of $7 million before tax. Other items includes the positive impact of reduced
deferred tax balances and dividends received from entities outside the capital group, net against non-recurring items.
( )
( )( ) ( )
( )
JON SUTTON
Managing Director & CEO
22
Economic
Regulatory
• Positive factors supporting economic growth
• Uncertainty over near-term outlook
• State economic performance remains mixed
• Volatility hitting funding markets
• Revised standardised approach
• Capital floor for advanced banks
• Staged approach to advanced accreditation
• Net Stable Funding Ratio
23
• $15m investment to remove duplication and manual processes• Organisational model
• Centres of excellence
• Digitisation of cheques, e-statements, etc
• Full return on investment within 12 months
• Savings to be redirected into further efficiency programs
• Continuous improvement culture
• Targeting cost to income ratio in the low 40s
24
Focus on niche segments that value a more intimate banking relationship
Vision …
Strategy …
FY16 priorities … Customer in charge
1. Expand accredited
brokers to 4,000
2. Roll out Virgin Money
mortgage product
3. Break-in digital
4. Ongoing branch
network optimisation
Grow the right way
1. Continue to increase
customer deposits
2. Maintain discipline in
pricing and credit
quality
3. Grow specialist niches
There’s always a better
way
1. Roll out new Lending
origination system
2. Utilising data analytics
3. Continue to invest in
risk foundations
Loved like no other
1. Instil sales and service
culture
2. Invest in leadership and
talent
3. Build diversity
Outperform sector EPS growthOutcomes …
25
Good result achieved in 1H16
Balancing growth, margin and credit
Asset quality resilient
Continued investment in growth businesses
Delivering on strategy, with increased focus on cost efficiency
26
1H: First half of financial year
2H: Second half of financial year
30DPD: 30 days past due
90DPD: 90 days past due
AELA: Australian Equipment Lessors Association
AFS: Available for sale
ALM: Asset & Liability Management
APRA: Australian Prudential Regulation Authority
Apts: Apartments
Avg: Average
BDD: Bad & Doubtful Debt Expense
bps: basis points
CET1: Common Equity Tier 1
cps: Cents per share
CPS: Convertible Preference Shares
CRM: Customer Relationship Management
CTI: Cost-to-income ratio
DRP: Dividend Reinvestment Plan
EPS: Earnings per share
FY: Financial year
GLA: Gross Loans & Advances
GRCL: General Reserve for Credit Losses
LOC: Line of Credit
LVR: Loan to valuation ratio
NIM: Net Interest Margin
OMB: Owner Managed Branch
Q2: Second quarter of financial year
ROE: Return on equity
ROTE: Return on tangible equity
RWA: Risk weighted assets
SME: Small and Medium Enterprises
VMA: Virgin Money Australia
27
The material that follows is a presentation of general background information about Bank of
Queensland Limited’s (BOQ’s) activities at the date of this document. BOQ does not warrant
the accuracy or completeness of the information contained in this document and has no liability
for any reliance by any party on the information contained in this document or for any direct or
indirect, special, consequential losses or punitive damages under any cause of action, whether
in contract, tort, under indemnity or statute (including for loss of data, loss of reputation, loss of
business opportunity or loss of anticipated savings) in connection with this document. It is not
intended to be relied upon as advice to investors or potential investors and does not take into
account the investment objectives, financial information or needs of any particular investor.
All information contained herein is confidential and proprietary to BOQ. No part of this
document may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying, recording or information retrieval systems, except where
expressly permitted by BOQ.
